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1 ENSURING TIMELY AND ACCURATE FINANCIAL PLANS, BUDGETS, AND FORECASTS THROUGH AUTOMATION April, 2015 Nick Castellina, Research Director, Business Planning and Execution Report Highlights p3 p5 p7 p8 Best-in-Class organizations are 39% more likely to automatically guide users through the planning, budgeting, and forecasting process. The Best-in-Class are 50% more likely to be able to assign resources and workflows for budgeting and forecasting activities. Organizations with automated processes are 49% more likely to enable business units to work collaboratively with finance throughout the budget process. Organizations that automate financial planning create 20% more accurate forecasts. This report identifies how top performing organizations automate the planning, budgeting, and forecasting processes to lead towards business success.

2 2 Ensuring Timely and Accurate Financial Plans, Budgets, and Forecasts Through Automation Creating accurate plans, budgets, and forecasts can be a challenge, and unfortunately, many employees are not trained or do not possess the knowledge on how to execute these correctly. Top performers automate these processes to improve efficiency and accuracy. The planning, budgeting, and forecasting processes are essential components of effective business management. Unfortunately, they can, at times, be very difficult to perform successfully. Many employees are either unequipped or too busy to learn the correct process, and therefore, rely on guesswork while taking less valuable information into account. This is a huge mistake, because accurate plans, budgets, and forecasts provide business leaders with the confidence that they can use when making decisions that guide the business towards success. Organizations must provide employees with tools that can help them to complete these processes quickly, comprehensively, and accurately. This report, based on a survey of over 200 organizations, identifies how top performing organizations automate the planning, budgeting, and forecasting processes to lead towards business success. The Trouble with Forecasting In Aberdeen's 2014 Financial Planning, Budgeting, and Forecasting and Enterprise Performance Management benchmark survey, respondents were asked to identify the top two pressures that they face in planning, budgeting and forecasting (Figure 1). Figure I: It s Never Easy Current budgeting and forecasting process is too long and resource-intensive 37% Market volatility creates the need to dynamically account for change Poor communication, coordination, and collaboration across departments or divisions Inability to trace business success to its key components 26% 32% 30% 0% 10% 20% 30% 40% Percentage of Respondents, n = 201

3 X 3 The number one challenge that survey respondents cited was that these processes are too long and resource intensive. They cannot be completed quickly and easily. This causes employees frustration, resulting in less effective planning than is needed. Further, even if these tasks were easily completed, there is still a chance that the plans, budgets, and forecasts that are produced would be inaccurate due to frequently changing markets. Lack of visibility and transparency is a common theme in business planning, and this is no exception. If employees aren t able to access the right information to assist in their planning at the time when their plans are being made, then the forecasting process becomes very difficult. Solving the Problem So what is an organization that struggles with completing the financial planning, budgeting, and forecasting processes to do? The number one strategy of Best-in-Class organizations is to automate the workflows related to these processes. Automation requires reliance on technology that can provide enhanced capabilities. For example, Best-in-Class organizations are 39% more likely to automatically guide users through the planning, budgeting, and forecasting process (Figure 2). The purpose of this is to ensure that all essential stakeholders are included, and required information is identified and used, and that information is centralized and aligned. The Aberdeen maturity class is comprised of three groups of survey respondents. This data is used to determine overall company performance. Classified by their self-reported performance across several key metrics, each respondent falls into one of three categories: Best-in-Class: Top 20% of respondents based on performance Industry Average: Middle 50% of respondents based on performance Laggard: Bottom 30% of respondents based on performance Sometimes we refer to a fourth category, All Others, which is Industry Average and Laggard combined.

4 4 Ensuring Timely and Accurate Financial Plans, Budgets, and Forecasts Through Automation Figure 2: Best-in-Class Automate the Process In the 2014 Financial Planning, Budgeting, and Forecasting and Enterprise Performance Management Benchmark Survey, respondents were ranked on the following criteria: Percentage of financial reports delivered in the time needed for decision-making: o Best-in-Class - 94% o Industry Average - 72% o Laggard - 63% Percentage that actual costs are within budgeted costs (above or below): o Best-in-Class - 4%, o Industry Average - 11% o Laggard - 35% Percentage that actual revenue is within forecasted revenue (above or below): o Best-in-Class - 3% o Industry Average - 12% o Laggard - 37% Percentage of Respondents, n = 201 Best-in-Class Industry Average Laggard 60% 40% 20% 0% 43% 36% 24% Participants in the planning / budgeting / forecasting process are automatically guided through steps Automation comes from the software available to business users intended to aid in all aspects of financial planning, budgeting, and forecasting. Top performers have implemented a variety of different types of software stretching from Enterprise Performance Management (EPM) to applications devoted specifically to financial planning, budgeting, and forecasting (Table 1). Sixty-six percent (66%) of the Best-in-Class have planning, budgeting, and forecasting applications which help to provide structure to these processes. Additionally, the Best-in- Class are 38% more likely to utilize EPM to ensure that they have accurate insight into performance data and can make more informed decisions. Similarly, the Best-in-Class are 69% more likely to utilize Business Analytics to improve their ability to predict outcomes. Combined, these tools can provide the automation referenced above by providing end users with guidelines, process flows, and valuable data and analysis capabilities.

5 X 5 Table 1: Key Enablers of the Best-in-Class Technology Best-in-Class All Others Corporate / Enterprise Performance Management Planning, Budgeting, and Forecasting Applications 44% 32% 66% 51% Business Analytics 49% 29% Dashboards 70% 35% Query and reporting tools 78% 49% The Benefits of Automation The essential capabilities related to automation in financial planning, budgeting, and forecasting make these processes easier to complete quickly, more accurately, and are now repeatable. In fact, organizations that automatically guide users through the process are more likely to have a variety of capabilities that ensure that all essential steps are completed (Figure 3). Figure 3: Crossing the Ts and Dotting the Is Percentage of Respondents, n = % 80% 60% 40% 20% 0% 55% 36% Standard workflow for decision-making Automated 48% 32% Ability to assign resources and workflows for budgeting and forecasting activities Not Automated 87% Budget templates are used to communicate and manage input 75% 52% 53% 69% 37% Corporate Ability to create process for allocation tables budget revisions, to assign costs roll-ups, and throughout the approvals has organization been established and implemented

6 6 Ensuring Timely and Accurate Financial Plans, Budgets, and Forecasts Through Automation Organizations with automated processes have defined the essential workflows that must be completed in financial planning, budgeting, and forecasting. These organizations are 50% more likely to be able to assign resources and workflows for these activities. This means they can ensure that each and every employee knows what they are responsible for and what they need to do in the process. The organization can ensure that no essential part of the process is overlooked. This is because these organizations are 67% more likely to have budget templates. Next, since the entire process is automated, the organization can more efficiently consolidate and approve the information before allocating finalized budgets across the organization. Automation in financial planning, budgeting, and forecasting helps to ensure that essential information is available and utilized in order to improve accuracy and agility (Figure 4). For example, organizations that have automated these processes are almost twice as likely to be able to incorporate business drivers into the ongoing forecasting process. It is possible because employees can easily find and integrate real-time data. For example, this creates the ability to reforecast as market conditions change, which would be extremely difficult with a cumbersome forecasting process. Figure 4: Integrating Essential Data Automated Not Automated Percentage of Respondents, n = % 40% 20% 0% 52% 44% 27% 25% Ability to Real-time incorporate updates to business drivers financial metrics into the on-going forecasting process 55% 38% Ability to reforecast as market conditions change 50% 35% 41% 27% Ability to perform Business users what if are able to create scenarios and reports / charts in change analysis a self-service capacity

7 X 7 Organizations with automated financial planning, budgeting, and forecasting are more likely to be able to perform what if scenarios, as well as create and alter reports and charts in a selfservice capacity. Employees will be much more likely to follow the process since it s easy to access the information they need. While these organizations are very clearly being walked through the steps to complete plans, budgets, and forecasts, they can also understand when it is time to include some advanced analysis in hopes of improving accuracy. Lastly, automating the financial planning, budgeting, and forecasting process allows for cross-organization collaboration, ensuring that all key stakeholders are involved and that budgets are aligned (Figure 5). In the past, there may have been employees on the line of business with real insight into future performance that were not consulted when creating forecasts. With automation, that is no more. Organizations with automated processes are 62% more likely to have a centralized repository of performance data Figure 5: Automating Collaboration Automated Not Automated Percentage of Respondents, n = % 80% 60% 40% 20% 0% 82% 84% 55% Business units work collaboratively with finance throughout the budget / planning process 61% Departmental budgets are aligned with overall business P&L statements 77% 50% Ability to integrate and align sales forecasts with overall business revenue and cost forecasts 82% 61% Finalized goals and budgets are clearly communicated to those who are held accountable 76% 47% Centralized repository of financial or operational performance data

8 8 Ensuring Timely and Accurate Financial Plans, Budgets, and Forecasts Through Automation Table 2: The Results Organizations that automate financial planning are 49% more likely to enable business units to work collaboratively with finance throughout the budget process. This gives finance the opportunity for everything to be in alignment across the organization and have budgets add up to goals. It s the only way to ensure that the organization s plans and strategies will actually lead to profits. Automated processes also help to ensure that everyone is held accountable to their goals. Employees are able to monitor their performance on an ongoing basis. In fact, organizations with automated processes are 62% more likely to have a centralized repository of performance data. This completes the lifecycle from planning through execution. The capabilities provided by automation in the planning process lead to several tangible benefits (Table 2). First, these organizations are able to provide more accurate financial reports to more key stakeholders. This leads to improvements in time to decision as well as more accurate budgets and forecasts. With this information, business leaders can make decisions that will grow the business and lead to improved productivity and profit margins. Average Performance Automated Not Automated Percentage of reports delivered in the time needed by 80% 75% managers Percentage of stakeholders with access to 74% 58% performance data Decrease in time-to-decision over the past year 12% 9% Increase in operating margins over the past 24 months 6% 4% Increase in productivity over the past 24 months 6% 4% Percentage within budgeted costs of actual costs 12% 15% Percentage within forecasted revenue of actual revenue 12% 15%

9 X 9 Key Takeaways Creating accurate plans, budgets, and forecasts is an extremely difficult task. Unfortunately, many employees just do not have the time, knowledge, and access to data that would allow them to complete these processes correctly. Still, without accurate forecasts, organizations will not be able to have confidence when making decisions to grow the business. Therefore, Best-in- Class organizations are 39% more likely to automatically guide users through the planning, budgeting, and forecasting process. As a result, these organizations can better standardize and streamline the process, increase access and utilization of data and analysis, and improve collaboration and communication. In fact, organizations that have automated these processes are: 67% more likely to have budget templates 50% more likely to be able to assign resources and workflows for budgeting and forecasting activities 76% more likely to have real-time access to financial metrics 43% more likely to have the ability to perform what if scenarios 49% more likely to enable business units to work collaboratively with finance throughout the budget process By relying on dedicated software, automation is the key to efficient and accurate financial planning, budgeting, and forecasting.

10 10 Ensuring Timely and Accurate Financial Plans, Budgets, and Forecasts Through Automation For more information on this or other research topics, please visit. Let s Do This Together: Collaborative Financial Planning, Budgeting, and Forecasting; January 2015 Staying Ahead of the Curve with Agile Financial Planning, Budgeting, and Forecasting; October 2014 Related Research Author: Nick Castellina, Research Director, Business Planning and Execution About Aberdeen Group Mobile EPM: Improving Decision-Making when Time is of the Essence; June 2014 Beyond Spreadsheets: The Next Level in Planning, Budgeting, and Forecasting; May 2014 Since 1988, Aberdeen Group has published research that helps businesses worldwide improve performance. We identify Best-in-Class organizations by conducting primary research with industry practitioners. Our team of analysts derives fact-based, vendor-agnostic insights from a proprietary analytical framework independent of outside influence. The resulting research content is used by hundreds of thousands of business professionals to drive smarter decision making and improve business strategy. Aberdeen's content marketing solutions help B2B organizations take control of the Hidden Sales Cycle through content licensing, speaking engagements, custom research, and content creation services. Located in Boston, MA, Aberdeen Group is a Harte Hanks Company. This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc.

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